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STOCK-BASED COMPENSATION | 12 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company’s equity compensation plans are designed to assist the Company in attracting, retaining, motivating and rewarding key employees, directors or consultants, and promoting the creation of long-term value for stockholders by closely aligning the interests of these individuals with those of the Company’s stockholders. The Company’s equity compensation plans provide for the granting of stock options. Non-cash stock compensation expense recognized by the Company during the fiscal years ended September 30, 2024, 2023 and 2022 was $188 million, $135 million and $153 million, respectively. The related tax benefit for the fiscal years ended September 30, 2024, 2023 and 2022 was $24 million, $15 million and $18 million, respectively. Of the non-cash stock compensation expense recorded in fiscal 2024, 2023 and 2022, $134 million, $112 million and $151 million was recorded as a component of additional paid in capital and $54 million, $23 million and $2 million was recorded as a component of other non-current liabilities. The liability awards relate to stock options granted between fiscal 2017 to fiscal 2020 from the 2014 stock option plan to certain employees in lieu of these individuals receiving salary and bonus compensation paid in cash. The vesting of the stock options are subject to the achievement of the same operating performance goals as other grants. The liability is remeasured each reporting period based on the market value of our common shares on the last day of the reported period. The other non-current liabilities related to stock-based compensation as of September 30, 2024 and 2023 was $102 million and $48 million, respectively. The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2024, 2023 and 2022 was $397.31, $251.73 and $254.21, respectively. The total fair value of options vested during fiscal years ended September 30, 2024, 2023 and 2022 was $97 million, $80 million and $88 million, respectively. Compensation expense is recognized based upon probability assessments of awards that are expected to vest in future periods, adjusted for expected forfeitures. Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate. As of September 30, 2024, there was approximately $245 million of total unrecognized compensation expense related to non-vested awards expected to vest, which is expected to be recognized over a weighted-average period of 1.9 years. The fair value of the Company’s employee stock options was estimated at the date of grant or modification using a Black-Scholes option-pricing model with the following weighted average assumptions for all options granted during the fiscal years ended:
| Fiscal Years Ended September 30,
| 2024 |  | 2023 |  | 2022
Risk-free interest rate | 4.14% to 4.68% |  | 3.45% to 4.20% |  | 1.47% to 2.97%
Expected life of options | 6.5 years |  | 6.5 years |  | 6.5 years
Expected dividend yield of stock | — |  | — |  | —
Expected volatility of stock | 33.5% |  | 32.5% |  | 37.0% to 38.0%
The risk-free interest rate is based upon the U.S. Treasury bond rates with a term similar to the expected life of the award as of the grant date or modification date. The average expected life of stock-based awards is based on the Company’s actual historical exercise experience. The Company uses actual historical changes in the market value of its stock to calculate the volatility assumption as it is management’s belief that this is the best indicator of future volatility. The Company estimates stock option forfeitures based on historical data. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change. Notwithstanding the special cash dividends declared and paid from time to time, the Company historically has not declared and paid regular cash dividends and does not anticipate declaring and paying regular cash dividends in future periods; thus, no dividend yield assumption is used. 2019 Stock Option Plan In August 2019, the Board of Directors of TD Group adopted a new stock option plan, which was subsequently approved by stockholders on October 3, 2019. The 2019 stock option plan permits TD Group to award stock options to our key employees, directors or consultants. The total number shares of TD Group common stock reserved for issuance or delivery under the 2019 stock option plan is 4,000,000, subject to adjustment in the event of any stock dividend or split, reorganization, recapitalization, merger, share exchange or any other similar corporate transaction or event. Performance Vested Stock Options – Generally all of the options granted through September 30, 2024 under the 2019 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, generally all of the options granted will vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options |  | Weighted-Average Exercise Price Per Option |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Outstanding at September 30, 2023 | 223,945 |  |  | $ | 627.81 |  |  |  |  |
Granted | 398,729 |  |  | 889.08 |  |  |  |  |
Exercised | (3,521) |  |  | 631.12 |  |  |  |  |
Forfeited | (58,044) |  |  | 792.32 |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |
Outstanding at September 30, 2024 | 561,109 |  |  | $ | 795.95 |  |  | 8.8 years |  | $ | 354,160,779 |
Expected to vest | 309,408 |  |  | $ | 833.09 |  |  | 8.9 years |  | $ | 183,800,728 |
Exercisable at September 30, 2024 | 120,116 |  |  | $ | 712.29 |  |  | 8.5 years |  | $ | 85,863,473 |
At September 30, 2024, there were 3,435,370 remaining shares available for award under TD Group’s 2019 stock option plan. 2014 Stock Option Plan In July 2014, the Board of Directors of TD Group adopted the 2014 stock option plan, which was subsequently approved by stockholders on October 2, 2014. The 2014 stock option plan permits TD Group to award stock options to our key employees, directors or consultants. The total number of shares of TD Group common stock reserved for issuance or delivery under the 2014 stock option plan is 5,000,000, subject to adjustment in the event of any stock dividend or split, reorganization, recapitalization, merger, share exchange or any other similar corporate transaction or event. Performance Vested Stock Options – Generally all of the options granted through September 30, 2024 under the 2014 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, generally all of the options granted will vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options |  | Weighted-Average Exercise Price Per Option |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Outstanding at September 30, 2023 | 4,246,321 |  |  | $ | 443.02 |  |  |  |  |
Granted | 158,550 |  |  | 971.00 |  |  |  |  |
Exercised | (529,387) |  |  | 316.35 |  |  |  |  |
Forfeited | (95,981) |  |  | 611.34 |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |
Outstanding at September 30, 2024 | 3,779,503 |  |  | $ | 466.18 |  |  | 5.2 years |  | $ | 3,631,913,408 |
Expected to vest | 785,057 |  |  | $ | 653.01 |  |  | 7.6 years |  | $ | 607,728,325 |
Exercisable at September 30, 2024 | 2,892,840 |  |  | $ | 390.75 |  |  | 4.5 years |  | $ | 2,998,078,391 |
The 2014 stock incentive plan expired on July 24, 2024 and no further shares will be granted under the plan thereafter. 2006 Stock Incentive Plan In conjunction with the consummation of the Company’s initial public offering, a 2006 stock incentive plan was adopted by TD Group. In July 2008 and March 2011, the 2006 stock incentive plan was amended to increase the number of shares available for issuance thereunder. TD Group reserved 8,119,668 shares of its common stock for issuance to key employees, directors or consultants under the plan. Awards under the plan were in the form of options, restricted stock or other stock-based awards. Options granted under the plan expire no later than the tenth anniversary of the applicable date of grant of the options, and have an exercise price of not less than the fair market value of our common stock on the date of grant. Restricted stock granted under the plan vested over three years. No restricted stock units remained outstanding as of September 30, 2018. Performance Vested Stock Options – All of the options granted under the 2006 stock incentive plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, all of the options granted vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options |  | Weighted-Average Exercise Price Per Option |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Outstanding at September 30, 2023 | 450,192 |  |  | $ | 211.49 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (375,977) |  |  | 199.71 |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |
Outstanding at September 30, 2024 | 74,215 |  |  | $ | 226.34 |  |  | 1.1 years |  | $ | 89,116,630 |
Exercisable at September 30, 2024 | 74,215 |  |  | $ | 226.34 |  |  | 1.1 years |  | $ | 89,116,630 |
The 2006 stock incentive plan expired on March 14, 2016 and no further shares were granted under the plan thereafter. The total intrinsic value of performance options exercised during the fiscal years ended September 30, 2024, 2023 and 2022 was $794 million, $500 million and $279 million, respectively. Dividends and Dividend Equivalent Plans Until August 5, 2022, pursuant to the 2014 Stock Option Plan Dividend Equivalent Plan and the Third Amended and Restated 2006 Stock Incentive Plan Dividend Equivalent Plan, all of the vested options granted under the existing stock option plans were entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company. On August 5, 2022, the Board of Directors adopted the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan, the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan, pursuant to which, all of the vested options granted under the existing stock option plans, except for grants to the members of the Board of Directors, are entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company. The amendments did not represent a change in the Company’s practice. In August 2022, all members of the Board of Directors at that time executed amendments to their option agreements resulting in the directors no longer receiving dividend equivalent payments in cash, but rather for special dividends declared after June 1, 2022, special dividends result in a reduction of strike price. In fiscal 2024, the Company’s Board of Directors authorized and declared $110.00 in special dividends on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans: $35.00 in November 2023 (also paid in November 2023) and $75.00 in September 2024. The special dividends totaled $6,153 million, of which $1,937 million was paid in the first quarter of fiscal 2024 and the remaining $4,216 million is accrued as of September 30, 2024. Subsequent Event – $75.00 Special Dividend Payment – The Company paid $4,216 million and $132 million in special dividend and dividend equivalents, respectively, in October 2024. Dividend equivalents on vested options were $233 million, $38 million and $86 million during the fiscal years ended September 30, 2024, 2023 and 2022, respectively. At September 30, 2024, there was $180 million recorded in accrued and other current liabilities and $47 million recorded in other non-current liabilities on the consolidated balance sheets related to future dividend equivalent payments.

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